A subculture of entrepreneurship hatches in Japan

'Japan's rate of entrepreneurship is still low. The first goal is to catch up.'

For years, Japan has been searching for a way to get its economic mojo back, and increasingly it's looking to people like 17-year-old high school dropout Yoichiro Mikami as the answer.

In a conformist culture where the socially acceptable road to success has typically meant cram school, matriculation at a prestigious university, then a lifelong climb up the ladder at a big bank or industrial conglomerate, Mikami has begun to write his own unconventional, entrepreneurial playbook.

As a 13-year-old, he won about $50,000 in a student business contest with an idea for an Airbnb-type service.

"I had no idea about start-ups then," Mikami said; and under Japanese law, he was two years too young to establish a company anyway.

But the recognition propelled him into a burgeoning subculture of entrepreneurship. He began toying with other business ideas, including a Bitcoin-esque service and a crowd-funding and social media platform called BridgeCamp, targeting top high school students.

"I realized I was 15, many big Japanese companies are already 50 or 60 years old, and they would need to survive another 50 years to employ me until my retirement," said the bespectacled Mikami, whose vocabulary and mien have matured faster than his still-boyish face. "But what if they go bankrupt when I'm 40? I would be thrown into an abyss. So I thought I should do something for myself."

Having won his parents' blessing to quit high school at the end of his freshman year, Mikami passed a GED-like exam and threw himself into his company, GNEX, bankrolled with his prize money and sponsorship from companies that include Recruit Holdings, a headhunting firm. Now, he's got nine people at work on the BridgeCamp platform.

Venture businesses innovate, and young companies create jobs. Older, established companies hire a lot of people, but they're not making new jobs.— Yoshiaki Ishii, director of the New Business Policy Office in the Ministry of Economy, Trade and Industry

"I want to think of myself as a guy like [Facebook's] Mark Zuckerberg," Mikami said. "But looking at other countries, Japan's rate of entrepreneurship is still low. The first goal is to catch up."

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Ask Yoshiaki Ishii how much Japan lags on entrepreneurship, and he'll pull out a folio of discouraging charts.

In the 1940s, start-ups like Sony and Honda helped Japan rise from the ashes of war and catch up with the West within decades. Japan remains the world's third-largest economy, behind the United States and China, and a powerhouse in sectors such as auto making, electronics, robotics, pharmaceuticals and financial services.

But since the 1990s, Japan has been trapped in a cycle of economic stagnation and deflation. Prime Minister Shinzo Abe says a key missing ingredient has been a lack of business start-ups, and he's made fostering them one of the pillars of his "Abenomics" program.

"Venture businesses innovate, and young companies create jobs," said Ishii, director of the New Business Policy Office in the Ministry of Economy, Trade and Industry. "Older, established companies hire a lot of people, but they're not making new jobs. We have to find a way to support" new ventures.

Ishii flips through the statistics: In the U.S. and Britain, 1 of 10 companies is a start-up; in Japan it's 1 of 20. In the U.S., venture capital investment amounts to 0.17% of GDP; in Japan, the total is just 0.03%. And despite being one of the most wired societies on the planet, Japan has not created global Internet-based "megaventures" like Amazon, Google or Facebook.

Abe wants to double the start-up ratio, but doing that, says Ishii, requires a number of changes, from incentivizing angel investors by modifying the tax code to encouraging established companies to partner with up-and-comers.

"There's been an NIH — 'Not Invented Here' — syndrome in Japanese companies. If they didn't invent it, they're not interested," said Ishii. "We want to change their attitude."

It's not just corporate mind-sets that need a rethink; society as a whole must adjust its outlook, said Ishii. In a country where only 14% of people say they personally know an entrepreneur, he says, there are few role models. And according to the Helsinki-based Hofstede Center, which looks at cultural differences as they relate to business, Japan is one of the most "uncertainty-avoiding" countries.

"The fact is, even if a guy wants to start his own company, it's often their wife, their mother or their wife's mother who stops them," Ishii said. "They'll say it's too risky to quit their job. Somehow, we have to get them to think that not taking a risk is also a risk."

Horie was found guilty in 2007; he appealed and his conviction was upheld in 2011, when he began serving his term. He was released in 2013 and is now back investing in start-ups. But his self-aggrandizing antics tarnished the appeal of entrepreneurship for a number of years.

"After that, the image of entrepreneurs really went down," said Teruma Terakubo, a staff member at a co-working space in Tokyo called Samurai Startup Island, which launched in 2011. "Today, we are seeing more and more people dropping out of major companies, but there are still not so many fresh university grads doing start-ups."

Waseda University, one of Japan's top private schools, launched an Incubation Promotion Office in 2001, offering classes, advice and support for entrepreneurial students and faculty. Through 2014, the center has incubated 73 ventures. But Takayuki Sako, manager of the office, says there's a long way to go; of Waseda's 50,000 undergraduate and graduate students, only 300 a year take the center's entrepreneur development course.

"For Japanese university students, the No. 1 goal is still to enter a big company; No. 2 is to become a bureaucrat, or maybe a teacher. An entrepreneur is still seen as a much lower position," said Tadashi Takiguchi, president of Waseda's Entrepreneurial Research Unit. "At Stanford or Harvard, the No. 1 goal is becoming entrepreneurs. It's totally different."

In March, Takiguchi took 20 Waseda students to California to soak up Silicon Valley culture, the fourth time he's done so. Among the lessons he hoped they'd pick up on, he said, is a) that it's OK to fail and try something new, and b) the seemingly obvious notion that if you do start a company, you shouldn't be averse to selling it.

"In Japan, only 10-20% of companies say they want to be targeted for mergers and acquisitions, but in Silicon Valley, it's 90%," he explained. "Young Japanese pour their love and sweat into a company and the company is family. For young Americans, the company is a tool."

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Samurai Startup Island is one hub for Japan's new entrepreneurs. A large loft-like space at the edge of Tokyo Bay decorated with colorful murals of cherry blossoms and samurai, it's full of espresso-fueled young men (yes, mostly men) tapping away on laptops.

Among them is Eiji Yagisawa, 37, an autobike-racer-turned-entrepreneur whose company, Fortuna, is developing software to help companies visualize and improve communication networks in their offices. Other start-ups in the space include Okuyuki, a crowd-funding platform to produce figurines of popular characters, and Another Life, which makes use of software to help people choose careers based on lifestyle objectives.

"Samurai-san accepts lots of unique and different people here," said Yagisawa, referring to the hub's founder, Kentaro Sakakibara, who has raised four incubation funds since 2009 and is now on his fifth, which is expected to close in June with nearly $20 million. He generally makes small investments in the seed and pre-seed stage; it was Sakakibara who pledged the $50,000 to Yoichiro Mikami when he was just 13.

Many of the start-ups that Sakakibara invests in set up shop at the hub, but it's not all newbies here. Among the 50 or so resident start-ups are some long-established brands like Ricoh, which moved five employees to Samurai Startup Island in 2014 to work on a new travel business.

"Until last year, major big companies were just trying to create new stuff by themselves, but they found it hard to find networks, so they are coming to us," said Terakubo, who helps organize the 200-plus workshops and seminars annually at the hub.

In April, Sakakibara's team will throw its 11th Samurai Venture Summit in Tokyo, expected to draw 1,500 companies, up from just 50 in 2008. There have also been four Samurai Venture Summits in Silicon Valley, the most recent in October, during which seven start-ups toured California for two weeks, meeting with entrepreneurs and venture capitalists.

The next frontier for Sakakibara is Israel. Last year, he launched Samurai House in Israel to start investing in and incubating Israeli companies.

"We in Japan used to have all of these entrepreneurs who built these amazing world-famous companies," Sakakibara said in a recent interview with the Times of Israel. "Connecting Japan with Israel's start-up culture can help the Japanese regain the entrepreneurial spirit that they used to have."

A renegade spirit who once worked as the captain of the Jungle Cruise ride at Tokyo Disneyland and has a penchant for quoting Arthur C. Clarke, Yoko Ono, among others, he founded his company, Eyes Japan, in the mid-1990s in the city of Aizuwakamatsu.

The company started by designing websites when the Internet was just taking off in Japan.

"We got paid like $1,000 a page in those days," Yamadera recalled.

The company then moved into computer graphics and now works primarily on network security, software research and development and graphic design, with 12 full-time employees and 18 part-timers.

Yamadera is skeptical of efforts to make it easy for young people to start their own businesses, but believes the government should make failure less painful — for example, by getting banks to do away with onerous personal guarantees that can wipe out an entrepreneur's personal holdings if his or her company goes under.

"The government is now encouraging young people to start companies, and it's totally the wrong way," said Yamadera. "I needed to save money — 3 million yen [about $30,000].... You need passion to start a new business. They shouldn't spoil entrepreneurs at the beginning, but they need to treat them gently if they fail."

Yamadera says the March 11, 2011, earthquake, tsunami and nuclear meltdown created new openings for creativity. The disaster inspired him to launch a new endeavor, Fukushima Wheel, a bicycle-centric technology initiative.

He envisions fleets of bikes in major cities equipped with sensors that can gather data on pollution, radiation and other environmental metrics, generating crowd-sourced "demographic data" that may be seen as more reliable than government-gathered metrics subject to manipulation for political ends. Using smartphones, riders could access coupons and travel information as they navigated a city.

"Oscar Wilde said, 'Where there is sorrow, there is holy ground,'" said Yamadera. "The 3-11 disaster pushed us in that direction. This is a chance for us entrepreneur types to step up and create something new and sustainable."